Initially a school teacher in Glasgow, he was appointed Rector of the Royal Academy, Inverness in 1894 and he then obtained the prestigious post as Rector of the Royal High School, Edinburgh in 1909.[2] It was while teaching in Inverness that he began to contribute to the Transactions of the Gaelic Society of Inverness and the Celtic Review.

He took the chair of Celtic at the University of Edinburgh in 1914, despite holding no prior university position. He remained in this prestigious position until making way for his son James Carmichael Watson in 1935 (but retaining a role in the university until 1938).[5]

His son James Carmichael Watson was born in 1910. He was declared "missing in action" in 1942 when HMS Jaguar was sunk off the coast of Egypt.[6] Presumed drowned he is memorialised on the Plymouth Naval Memorial.[7]

He is best known for his The Celtic Place-names of Scotland (1926), based on 30 years of work. Watson's work, eight decades later, is still the primary scholarly reference guide on the subject. The book is based on extensive notes taken by Watson, which are unpublished and held by the University of Edinburgh. Watson's great work was recently republished by Birlinn (2004).